Thursday, September 13, 2007

Why? Because the price of grain has increased as more and more farmers are encouraged to use their land for ‘bio-fuel’ products and less for growing food.

There is a shortage of grain. That means that the cost of grain derived products is increasing.

Italians have been on a ‘pasta strike’ today in protest against the rising price of spaghetti, etc...

Poles are facing a doubling in the price of bread and other products related to grain this autumn.

And the only reason for this is because the EU is giving greater subsidies to farmers turning over their land to growing rape seed and other products that could be used for bio fuel.

So Jo Kowalski is going to suffer from the current prejudice among middle class westerners that the Earth is going to hell and we should be all producing less – particularly emerging economies like Poland.

So cheers the Green consensus! You are making the price of bread more expensive for many poor people of Poland in your zeal to ‘save the planet’.

61 comments:

geez
said...

Most environmentalists I know in the US are very much opposed to bio-fuel production because land can be put to better agricultural use, it depletes soil nutrients quicker than other crops, the resultant pollution runoff caused by the use of artificial fertilizers, and because it still takes about a gallon of gas to produce a gallon of ethanol (and that doesn't even factor in distribution difficulties).

They or may not be opposed to bio fuel production….but the environmentalist paradigm has Got deep into governments.

And Greens are very keen on organic food production and against conventional methods of farming and GM. Organic is a very inefficient use of land because the yield is so much smaller per sq hecter. So as organic becomes more fashionable more and more land will have to be used for farming.

So bio fuels + organics = higher cost of food. OK for middle class Guardian readers in the west, not good for anyone else.

Why grow bio-fuels? They can be made by converting redundant products like chip fat as has been prooved.

Is this just a case of policy faliure though, hasn't this years weather also meant that most countries have had a wheat crop faliure? Poland is actually the exception and stands to gain from the hike in wheat prices.

Come BR, you can't have it both ways: either you're a raging capitalist (i.e. "Greens! Bad! They stand in the way of PROGRESS!") or you're a socialist ("Trickle down enrichment is a myth!")

Got any evidence that more Polish land is being used to grow crops for biofuels? There is plenty of evidence to suggest that the shortage of bread in Poland is actually due to so much of the stuff being exported. Last year the value of exported bread was five times more than that of exported vodka and this year Poland is well on the way to exporting half a billion Euro worth of bread and other bakery products.

But instead of saluting this Polish sucess story instead you use it as a soapbox to bash people who want to make their world and yours a better place. Rather predictable really...

First off, the bread export thing. In trade terms the term 'bread' is used for not just loaves of bread as we know it but all sorts of baked products, including pastries etc. And all that bread is especially made for the export market - many of the bakeries close to the German border, in fact. So the export of bread is not caused by any shortage.

It is caused - and this is a fact - by a global increase in grain prices, in which there is a shortage. This is because more and more land is being used for bio fuels, which attract larger subsidies.

Another confusion - the idea that high growth economics is somehow 'capitalist' and low growth economics is 'socialist' or even leftish. Where did you get that idea? All socialist economies try and maximize production so there is more to go round. Increasing production is essential to that project.

It is only recently that Greenies have turned 'leftish'...in the past conservation was a project of reactionary conservative thought.

I am for high growth economies...it doesn;t matter if they are socialist or capitalist...what is reactionary is the growth sceptic environmentalists.

In the US it is actually an oil company that is in the forefront of reaping the gains of government subsidation towards biofuel production. And it's the worst kind of production of course... corn which must be grown on good land, depletes the soil, is dependent upon artificial fertilizers than run off into the rivers, it the least efficient crop in terms of the ratio of gas it takes to produce and distribute.

There are all kinds of multi-variable efficiency scales in terms of choosing crops. From what I've read, switchgrass might be the best option. I never heard of chip fat, though but will look into it. And there are different ways of converting the plant matter to ethanol and it looks like the enzyme decomposition route has become predominant although some scientists have some hope that another process called gasification may prove more productive in increasing the yield of ethanol. But there's still then the problem of distribution and that ain't gonna go away unless there are more gubmint subsidies to establish pipelines and a distribution network.

So in many ways its the growth mad scientists and oil companies who are responsible for pushing ethanol as an alternative rather than perhaps more promising alternative energy resources. Here it's a political choice by the gubmint.

And from what I've read, we have more of a problem with cow farts than gas emissions causing global warming. Seems if we concentrated more on conserving the rain forests instead of clearing them for McDonald's cows, we'd be doing ourselves and our planet a big favor. Indeed, cow farts overall produce more harmful emissions to the biosphere than SUVs etc.

Economists and producers say pasta price hikes are being driven by increasing wheat prices worldwide. The demand for wheat is the result of several trends, chiefly an increasing demand for biofuels, which can be made from wheat, and improved diets in emerging countries where putting more meat on the table is raising the demand for feed for livestock, said Francesco Bertolini, an economist at Milan's Bocconi University.

All this growing crops for bio fuel appears to be a load of nonsense which doesn't benefit the environment and makes people poorer in the long run with higher food costs,only the farmers benefit with their plumped up EU subsidies for growing rape seed oil.Bio fuels will never have much impact on climate change. Subsidies should be going to make massive cuts in industrial CO2 production.

Better to clean up our act using fossil fuels-carbon capture from power stations(especially in Poland where most are coal fired) and heavy industry and more development on hydrogen fuel cells for transport.

Er, BR, firstly there is a rather large surplus of wheat in the EU. The UK alone had a surplus of 2 million tonnes in 2005. There may be a global shortage but thanks to capitalism the EU wheat surplus won't solve that problem.

Simply redirecting that wheat surplus to biofuel would meet 2.5% of the UK's petrol needs.

And let's not even get started on the fact that second-generation biofuels are made from non-food crops and many from food crop by-products.

One little test for your knowledge of economics: if the half billion Euro of bread and baked goods which currently leave Poland did not leave Poland, what effect would that have on the price of such goods in Poland? So basically Poles are paying more for their bread because Poles prefer to sell their bread to foreigners than to Poles. Us wicked foreigners! We even take the bread from the mouths of Poles!

Actually most of that export bread (and cake) goes to feed emigrant Poles in the UK who pay for it with foreign currency and thus help Poland's balance of trade.

I'd guess that not a little of the export goes to the US, Canada, and Australia, too.

Also, there's wheat in beer which has to be factored in. This past week I bought six packs of bottled Zywiec, Okocim and Tyskie for $6.45 each (including a 5 cent return on each bottle). Happy to do my part to help Poland's economy.

A lot of the bread, cakes etc goes to Germany too - people forget that the largest number of Poles working abraod is in Germany...that is why so many of these bakeries have been set up near the border.

And you are right: the demand for these products wasn;t there until recently. It is not that Poland is using bread making capacity to export rather than feed their poor starving people. So Harry is being a bit silly, really.

Well, if those stupid Arabs stopped blowing up oil piplines in Iraq, if those stupid Venezuelans stopped electing Chavez, and if Putin stopped blackmailing his neighbors by threating to stop oil exports, maybe the oil prices would much lower and it wouldn't be economically viable to produce ethanol...

It seems that the EU is the main culprit in this part of the world...though as we have seen the grain shortage has caused pasta strikes, tortillas riots and the french have got very upset about the rising price of the baggette.

The last time they doubled the price of bread over night in Poland there were riots too (although they all prices shot up by 100 percent - it was called Stalinist economics...)

You need to go back to remedial ecomomics. You have spent far too much time with the flat earth crowdon the left.

Comodities of all types are subject to fluctuations. The greatest cause of these fluctuations is the market demand.However, you seem to forget that leftist goons have distorted the market by fiat. We could also go into other numbers such as energy conversion ratios.

Oil prices are subject to fluctuations in the business cycle,political and local unrest and the price of competing energy forms.Contrary to the deluded notion of sophomoric Marxist naves ( not you)the price of Oil is not linear.

The riots the usual suspect refer to are in countries where the products are subsidized. However, as a mostly reality based cynic you do understand that forcing farmers to produce at a loss creates scarcity. This is also excacerbated when Communist tryants hand over productive farmland to unskilled political cronies.

There are many variables at play in the biofuels formula. The added demand could eliminate the need for subsidies.The long term impact is far more complex than you presented.

However, you neglect to mention a certain political philosophy has repeatedly used starvation as a means of social control. Moreover, the reapeated mismanagement and cronyism has created famine in food exporters. The worlds poor would be better served if utopian collectivists would revert to generic strongman cleptocracy.

If prices go up its either supply going down or demand going up. Beatroot contents it's supply, others like harry that it's essentially demand. The way to tell is to look at what is simultaneously happening to quantity produced/consumed. If quantity is going up while prices are going up then it's demand. If quantity is going down while prices up then it's supply.From that article:"shortages of cereals on the world market." So quantity is going down.

Though I agree with geez that I'm not sure to what extent are biofuels responsible for this. I mean, they're a terrible idea and in the US even environmentalists and most of governments have given up on them (aside from some ag states) and pretty much the only people who are pushing it hard are folks like AMD (big farming corporation that makes Microsoft look like your neighborhood grocer in terms of its monopolistic practices) who use it as cover for handouts from the government.

It’s not only the subsidy racket. The price of eggs is going up in Britain, too, after being low for ages. Because we now have international markets, prices can be kept low. And that leads to shortages as producers cut back. EU Referendum puts it:

Supermarkets are highly adept at manipulating the market. As British producers attempt to increase prices, buyers look elsewhere in a truly international market and suck in local surpluses at bargain prices, wherever they might be found. By this mechanism, prices are sometimes held artificially low, in which event producers respond by cutting back production until the prices improve.

So in international markets prices are going to always bee kept low until there is crisis in supply, which it will tend to. And then prices go up too much,, and then there is a correction in supply (like the EU is trying to do now…

The only way round that is having local, protectionist markets only, with bags of subsidies, probably. That is, in fact, the Green position.

Greens also think that there is a limited amount of resources, so in the end, supply will never be able to keep up with demand. Just too many people, you see.

It’s called neo-malthusianism …or something…

But there is no reason why there should be a necessary shortage of supply We can use technology to increase yield, etc.

Lets roll this back again. All food prices are comodities that are subject to fluctuation. There is also substitution of goods when prices increase.

The presence of subsidies rewards inefficient production and distortsthe market. Comodities are sold at replacement cost in the real world.You finger pointing at retailers is way off base. Kindly ask anyone who purchases comodities to explain that to you.

I will point out that you are interesting even when you are wrong. Do note that Mexico still had food on the shelves albeit at a higher price. It took Chavez's mismanagement to create scarcity.

While we're hear, has anyone noticed how bad bread is getting in Poland?

I think the technique is to puff it full of air (which keeps it the same size even as it loses weight) but it tastes worse and is altogether less satisfying than in the early 90's. It's nowhere near as awful as bread in the US is, but the awesomeness that was Polish bread is long gone (though it's a lot better in the countryside than in cities now).

Used to love serek homogenizowany (especially the kind with the little chocolate chips) on good Polish bread for breakfast. The bread I was eating from local bakeries was still absolutely wunnerful last I was there about 5 years ago.

BR, regardless of who might or might not be being silly, you want to make any comment about the fact that the EU has a huge surplus of wheat? The EU produces some 120 million tonnes of wheat, 12 million tonnes more than it needs.

How you can claim that reduced supply of wheat is causing prices to rise is quite beyond me. If you want to look at why cereal prices are actually rising, have a look at India and Asia. Last year India imported 7 million tonnes of wheat, what kind of effect do you think that demand had on prices? And can you tell us how much of arable land in India is given over to growing crops for biofuels? Enough to make them need to import so much wheat?

BeakIf you are saying the state or suprestate organizations come in and distort the market, then yes, this is a feature of markets for food. But I would remind you that that is a feature of all major capitalist markets, not just your hated Chavez. The US state subsidizes its food producers even more than the EU does.

Mike The ubiquitous white bread roll has got bigger and more full of holes over the years. But that is because they use more yeast I guess (it puffs up not because of ‘air’ but because of the process of yeast producing….that gas….can’t remember which one. But the variety of bread in Poland has got much wider than ten years ago and that is a good thing.

HarryOne of the problems with the food price hikes that will feed their way into the market this autumn is thst the EU been restricting the amount of land used for grain production…which means that there is not enough supply. What the EU has decided to do is stop insisting that 10 of land be left unused….and so release that over to grain production. It brought in the land use restriction because of the grain mountains that were being produced in the late eighties early 1990s. But that is not the case these days and has not been for some time.

Here is where you are wrong. The US subsidizes existing farms that produce crops. Moreover, its subsidies are floor prices but it does not fix costs below production. The idea is rewarding existing farms that produce a quanitfiable product.

Chavez has stolen land and assetts from skilled farmers and mostly handed it out to cronies with zero apptitude. He has made a few meaningless attempts to form peasant collectives with the predictable disasterous results.

The situations are not similar in any description.

I am not a fan of agricultural subsidies. They are mostly pork handed out by political hacks and hurt the consumer.

Lets go back to how comodities are sold in the real world. Comodities are sold at replacement cost. If the price of a comodity has increased than the inventory is sold at a higher price.

Only if you think that having more different kinds of crap is better than having less variety but higher quality.

I could not disagree more. I am just back from the weekly supermarket shop with She Who Must Be Obeyed. At the bread counter there were several different types of just baked bread…smelling gorgeous…. all of which looked yummy. All different types of Polish bread…Italian bread, etc top top stuff. Better now than back in UK (which was never brilliant). Maybe Poznan is too influenced by German bread tastes (not to my liking…but still better than Scandinavian bread yuk!).

Beak – percentage of GDP spent on food subsidies in US is higher than in EU. Fact. Now that means that food is VERY cheap in US, which I think is a good thing – although many Americans get a shock when they come to Europe as things just taste better. So ‘quantifiable’ is at the price of ‘qualityfiable’…if there is such a word (which spellcheck doubts and so do I….but you know what I mean).

As regards subsidies…New Zealand used to heavily subsidize its lamb production. And then it dropped them all at once. There was disruption for a while but then production reached higher levels than before…without affecting quality…and luckily the UK is still able to access that market (another thing the Greens hate, of course as it has a big ‘carbon hoof print’ (if sheep have hooves, which I think maybe they don’t…).

The USA creates price supports, but does not fix the cost of food below production. This is not a policy I agree with. However, the notion is to keep comodity prices from falling below production costs.

Communist goons like Chavez confiscate farms that are well run and hand them to cronies. The cronies have zero aptitude for farming and the forced collectives have failed in every example. How these policies remind you of Peron is amazing.

If you wanted to help the world's hungry the best way is to eliminate Communism. Even in the great depression the store shelves had plenty of food. It takes the application of utopian malfeasance to change a net food exporter into a country with famine. Despite the usual suspects claims the poor in the USA are often obese.

As far as European vegtables tasting better dream on. Even Pavarotti sent cases of Redpack brand tomatoes back to Italy from the USA.

BR: are you having trouble understanding the facts here or are you deliberately trying not to understand the very simple fact that the EU has a grain surplus?

There were grain mountains in the late 1980s, the early 1990s and there are still grain mountains today! In the 2003 to 2004 season the EU wheat surplus was 26 million tonnes, up from 10.6 million tonnes in 2002 to 2003. http://www.internationalmilling.com/public/europe.pdf for more details.

There are many reasons why grain crop yields have fallen, bad weather is the most significant. Or at least that is what the EU is telling us. " The 2006 crop was lower than expected, at 266 million tons, due to adverse meteorological conditions. Intervention stocks have considerably tightened during the campaign 2006/2007, from 14 million tonnes to around 1 million tonnes." Note that there is still a 1,000,000 surplus."...."The 2007 cereals crop is now estimated below last year's level because of dry and unusually hot weather in April followed by adverse summer weather in western Member States and drought and heat-waves in the Southeast of Europe."http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/1329&format=HTML&aged=0&language=EN&guiLanguage=en

"The drought in Australia has led to dwindling wheat stockpiles."...."Poor weather in Canada, Europe and Argentina has also hurt the global supply of wheat."http://www.world-grain.com/news/newsfinder.asp?Action=UserDisplayFullDocument&orgId=586&docId=l:669375369&topicId=14429&start=16&topics=single

Note that there is not a single word about wheat production being ditched in favour of bio-fuel crop production. Instead the reason is unusual weather. No doubt as a committed green basher you will blame this unusual weather on the amount of hot air coming from greens talking about unusual weather.

Another factor which causes grain prices to rise is increased demand from the developing world. "The populations of many emerging countries are seeking improved diets, and putting more meat on the table is raising the demand for feed for livestock." http://www.iht.com/articles/2007/09/13/business/pasta.php As you always support everything which makes human life more pleasant, of course you support the efforts of people in the developing world, even if their actions do mean higher costs for middle-class bloggers in Poland.

But what of your claim that the accursed bio-fuels cause wheat price rises? Well it seems that experts do not agree with you, or at least the experts who are not funded by the oil lobby and so always opposed to bio-fuels"Global price fluctuations in the grain markets have always existed, although we are for some, like wheat, at historic highs at the moment," Achim Steiner, executive director of the UN Environment Program, said at a news conference in Rome. "It would be somewhat premature to say that pasta costs more because there is biofuel grown in other parts of the world."http://www.iht.com/articles/2007/09/13/business/pasta.php

One other point crops contracted for non-food use, such as biofuels, can be grown on EU set-aside land. So your claim that the cursed biofuels had caused farmers to stop growing grain for human consumption is frankly just bollocks. Farmers don't need to stop growing wheat in order to grow bio-fuel crops: they can already grow those crops on 10% of their land and would have had to leave that land fallow otherwise!

And please don't try to claim that the lower wheat crops are due to that 10% being set aside in the first place. As I've already explained, the low crops are due to unusual weather, perhaps we might want to check out what is actually causing that weather....

Taipie TimesAs more people embrace ethanol and other biofuels as eco-friendly alternatives to fossil fuels in curbing global warming, the unintended consequence is a rise in food prices as demand puts pressure on agriculture.http://www.taipeitimes.com/News/biz/archives/2007/09/17/2003379205

Interesting view from India

http://desicritics.org/2007/09/08/011209.php

And back to the Pasta Strike.

{The Italians] protest pasta prices that have soared by as much as 20 percent in the last two months The culprit, pasta makers say, is the demand for biofuels, The same thing that's raising the price of beer in Germany and tortillas in Mexico

So, there are many mentions of this reason…but not to someone leaving out the unfortunate bits. Like facts that don’t fit.

But let’s see where your argument has gone in the last few days.

We first were told that there was a bread shortage in Poland because ‘we are exporting more of the bread…’

What you did was see two independent variables and make one of them into a dependant variable – which is a bit like saying because there are lots of stalks sitting on roofs with lots of children in then, then it must mean that the stalks bring the children down in little baskets in their beaks.

But you gave that one up pretty quick. And now bread has and is going up because of……well, just about everything in the world. Including the fluttering of a butterfly’s wings in the Rain Forest!

Your argument is that only biofuels are causing bread prices to rise and that greens are solely to blame for this because biofuels use land which could be used for growing wheat.

Mine is that half a billion Euro worth of bread being exported has an effect of the price of bread here, that the EU has a surplus of grain, that biofuels can be made from many things other than grain, that the increase in the price of grain is largely due to unsual weather conditions (do forgive me for prefering direct quotes from experts rather than indirect quotes from pasta makers), and that while generation one biofuel crops need land on which to to be grown, the 10% of set aside EU land is far more than is used to grow biofuel crops.

I do find it highly amusing that you mindlessly reproduce the PR material of the big oil companies without even getting a cut of the cash they hand out to people who say that biofuel production is the sole reason for rising grain prices!

Now let's come back to the first question I asked you: Got any evidence that more Polish land is being used to grow crops for biofuels?

And while we're on the subject of questions you don't want to answer, explain this: "But compared with countries such as Mexico, where the price of corn determines in large part the cost of staple foods like tortillas, in Europe cereal prices weigh little in the final cost of items such as French bread or Italian pasta.According to Loek Boonekamp of the Organisation for Economic Cooperation and Development (OECD), an increase of 20 percent in the price of basic agricultural products results only in a rise of 1.0 percent on store shelves."http://www.eubusiness.com/Energy/1185681601.8/?searchterm=NoneYou are claiming that the price of bread will go up by 100%, has the price of grain gone up by 2000%?

I'd also be interested in finding out how much land in Poland is used for biofuel production. And what kind of crops, with a percentage breakdown, are being used. Same for the EU as a whole.

And I really don't understand why 1st generation crops (mainly corn) are still used so much -- at least in the US. Aside that is from the oil companies and their agribusiness buds getting welfare mega-$$$ subsidies and attendant profits from it.

And again, many US environmentalists seem to have abandoned hope in biofuels as a viable energy source, looking instead to wind and solar power. Also, they call for more emphasis on developing more stringent energy and ecological conservation policies.

I just came across a US Department of Ag report on the Impact Assessment of the 10% EU Biofuel obligation by 2020. It starts right out by stating: "Prices on cereals and oilseeds are expected to increase due to the demand for feedstock. The largest price increase is expected for oilseeds, mainly sunflower seed."

And...

"Under the 10% obligation, about 59 million tons of cereals or 18% of domestic uses, is expected to be used as first-, and including straw, also as 2nd generation biofuels. Most of the cereals used would be soft wheat and corn . The Commission expected that this will be provided by a yield increase of about 1% per year which would lead to a 38% million tons more creals in 2020 and another 14 million tons could be grown on set aside land, if the set scheme lasts. Domestic use of cereals is expected to increase significantly while exports will decreas. Cereal prices would appear stable... The long run impact on biofuels on cereal prices is expected to be in the range of 3-6% as compared to 2006 prices. The second generation biofuel production would reach about a third of the domestic biofuels production, largely by incorporating the straw and wood based celusloic matieral into production..."

Sorry but I lost the url but you can google it from what I've provided.

BR: you should read this thread. You will learn something: wheat prices are going up due to unusual weather and increased demand. And furthermore, an increase of 20 percent in the price of basic agricultural products results only in a rise of 1.0 percent on store shelves.

You might also learn that the numbers that you have given are the percentage of land which the EU used to set aside, the amount that the price of pasta has increased by and amount that the price of bread in Poland might go up by. Your entire argument is based on the fact that biofuel can be made from wheat and that this fact is the only reason that the price of wheat is going up. Pity that none of the people who actually know about these things agree with you.

I still haven't seen/found a breakdown of how much biofuel production in Poland and the EU as a whole comes using respectively wheat, corn, sunflowers, rapeseed, switchgrass, whatever. I imagine that somewhere there exists data for the tons produced of each for UE and Polish biofuel production and attendant percentages. I wish I could find such info for the US as well.

Does anybody here know of the actual tonnage/proportions?

And at least the USDA does see cereal prices rising as a result of increased "feedstock" demand. But a 3-6% increase "long range" doesn't seem like a heckuva lot to me and may be explainable by lotsa other variables.

BR: you have provided close to bugger all evidence that biofuels are any part of the reason why the price of bread in Poland might double. Let's see some hard facts to back the opinions that your reproduce here. Just because a pasta maker says something does not make it true.

We have provided numerous facts and figures and data and statements from recognised experts. You have provided no data at all. You have provided the opinion of un-named pasta makers, the thoughts of a lazy journalist from Taiwan and the most substantive comment you have comes from a man who says that “demand for wheat is the result of several trends”.

You point-blank ignore evidence and statements from recognised independent experts that the current high wheat prices result from unusual weather conditions and increased demand from developing nations and that a 20% increase in the price of basic agricultural products results only in a rise of 1.0 percent on store shelves. Fine. Here are some opinions from the people whose opinions are more important that all the facts and figures and statements of experts that we have posted: opinions from pasta-makers and Francesco Bertolini.

“But Marcello Valentini, vice-president of the Union of Industrial Italian Pasta-Makers blamed the price rise and Italian consumers' ire on the "higher demand from fast-growing economies, India and China for European food".”“India's emerging non-vegetarianism is described by Francesco Bertolini, an economist at Milan's Bocconi University, as a product of improved diets in emerging countries. But it means the world has to put more meat on the global table, which is raising the demand for feed for livestock, Bertolini said.”Both from http://timesofindia.indiatimes.com/World/Pasta_stir_sparked_by_India/articleshow/2367001.cms

Go and buy a dictionary. Then look up the meaning of the word ‘evidence’.

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